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After the Expansion

June 15, 2017

Utilizing our remotely sensed vessel position data, we took a look into the aftermath of the Panama Canal Expansion project.  Our data shows that the monthly average of Panama Canal tanker transits reached 85 trips in the first five months of 2017, a 16.5% year-on-year increase from 2016.  The passage way concluded its expansion in June of 2016, which added a third set of locks and doubled the canal’s transit capacity.  Since the beginning of 2017, we have seen a notable rise in Aframax/LR2 sized transits following a lack of activity in the second half of 2016, likely due to requirements to install new equipment aboard vessels before making the voyage as well as numerous reports of collisions with the canal walls, which may have deterred owners.

Just one Suezmax transited the passage way in August of 2016, a rare occurrence as this sized tanker cannot make the trip fully loaded and must partially load or partially discharge before making the trip.  Panama Canal transits on MR sized ships have remained relatively steady, while Panamax/LR1 sized vessels experienced just a slight bump in activity through 2017.  We have also witnessed growth in the quantity of vessels transiting the canal with US Gulf cargoes as the average number of transits rose to 43 per month.  A majority of this activity stems from MR vessels, likely transporting gasoil to Chile.  

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Weekly Tanker Market Snapshot

June 9, 2017

The following is an overview of tanker spot market activity for the week ending June 9, 2017

VLCC

We counted about 20-22 vessels reported fixed or on subjects in the Arabian Gulf this week with freight rates relatively steady at WS 50 for AG/East depending on factors such as age, preferred destination and if the vessel was disadvantaged.  The TCE for a voyage on the AG/Japan route was pegged around US $16,000/day (WS 50), while AG/West paid in the mid to high WS 20s with less downward due to the fact that the follow up voyage from Caribbean to the East was in the very low US $3 millions for Singapore, plus US $1.0 million for Ningbo, which gives a TCE of about US $21,000/day with normal wait times. 

We observed about 9-10 vessels reported fixed or on subjects out of West Africa with rates steady in the mid to high WS 50s for various East options.  The TCE for a West Africa/China voyage was around US $19,000/day, while West Africa/India was pegged at US $23-24,000/day, which made it a better deal than an AG/USG/Carib/Singapore triangulation in some respects.  Charterers in the Western Hemisphere booked 4-6 vessels; however, rates remained weak with US Gulf to Singapore below US $3 million and Caribbean to Singapore fixing in the very low US $3 millions.  One deal was reported on subjects from the UKC to Korea at just under US $3.9 million, while nothing was reported out of the Mediterranean or Brazil this week.  Interestingly, about four Suezmax cargoes seen out of the Caribbean and US Gulf to the East were fixed at a higher rate/bbl level than if a VLCC were used.   

SUEZMAX

The West Africa market continued to feel the pressure of ample tonnage in combination with a meager volume of inquiry this week.  At the start of the week a rate of WS 74 was achieved for discharge in the UKC-Med and as inquiry surfaced freight rates continued to decline, falling further to WS 67.5 UKC-Med and WS 65 for USAC.  A modest rebound to WS 70 mid-week did little to comfort owners and as the week progressed we observed rates fall to year lows of WS 62.5 basis USG and WS 65 basis UKC-Med.  Additionally, WS 72.5 was concluded for the USWC twice, while a cargo to the East fetched WS 72.5.   

Despite an uptick in activity freight rates succumbed to the general malaise of the overall Atlantic Basin market.  The Black Sea/UKC-Med trade fell a further five WS points to WS 72.5, while a voyage on the EMed/EC Canada route concluded at WS 55 on an ex-dry dock vessel.  Lastly, a cargo loading Algeria for discharge in Australia was covered at US$ 2.775 Mil and represented the only East voyage.

Fixing volume was fairly robust in the Americas with about nine vessels reported fixed or on subjects, nearly double last week’s activity.  Despite this, freight rates remained stagnant for the most part as the weak Atlantic market gave owners cause to stay local.  Voyages on the Carib/USG route traded consistently at WS 65, while cargoes destined for China paid in the US $2.875-3.2 million range, depending on load and if heat was required.  In the West Coast Americas, a vessel was placed on subjects at US $1.8 million basis Ecuador/East. 

With Saudi Arabia and the United Arab Emirates (UAE) placing a ban on Qatar flagged tonnage from trading to/from their ports as well as other tonnage trading between the nations, some charterers avoided uncertainty by chartering two Suezmaxes in lieu of VLCCs, which usually co-load at various ports in the Arabian Gulf.  This first poised a positive opportunity for Suezmax owners; however, it failed to yield any significant results with freight rates on the AG/East trade at WS 67.5 consistently.  The lone fixture out of Kharg Island for UKC-Med discharge was covered at WS 39, up slightly from last week, while a voyage to Durban fetched WS 47.5.

AFRAMAX

The Caribbean market suffered this week with TCEs just a touch above US $4,000/day, not yet a year low.  The weakness in this market is likely to persist next week as we expect freight around WS 90.  It was similar story in the Black Sea/Mediterranean market with rates down to WS 95 across the board.  Activity picked up towards the end of the month and delays in Trieste also rose; however, the oversupply of tonnage mitigated any potential rate support.  We remain of the opinion that the Mediterranean market will be supported by higher Libyan output compared to last year; however, production is likely to remain at current levels. Recent reports indicate that the National Oil Corporation’s intentions to boost output to over 1 million b/d may be too ambitious as upgrades and repairs are required on infrastructure, while foreign oil entities tend to steer clear of investing in a country with consistent militant conflicts.  There have also been reports that oil output was cut down by a quarter due to protests from oil field workers

PANAMAX

Activity was spotty in the Caribbean this week as the market softened a hair to WS 112.5 on an early week Mexico stem. There is ample tonnage in both the USG and Caribbean for any potential cargoes and we don’t expect much change in the market going forward.

Fixing increased in the UKC-Med this week, but rates made no improvement from last week levels. The trans-Atlantic market remained flat at WS 112.5-115 levels for USG discharge and with vessels still available in the region, we project a flat trend for the weeks to come.

CLEAN

LR2s in the Arabian Gulf have had a steady week with rates creeping up to WS 90 for TC1. Uncertainty about co-loading at Qatar has led to charterers and owners to hold off from committing, it has also provided a premium if required. However as it stands still prompt tonnage keeping a lid on things. As such rates remain 75 x WS 90, AG/West x US $1.35million and EAFR 90 x WS 87.5. 

LR1s have had an active week with nearly 20 vessels going on subs for both long and short haul cargoes. Tonnage has been more than enough to match demand and as such rates have corrected back to WS 105 for TC5. The majority of cargoes have now been covered out to end 2nd decade June. The market will need more activity start of next week before owners can look to push. AG/UKC – US $1.1 million, Sikka/ag 235k, Sikka/Spore-EAFR WS 110. 

The USG market got off to a quick start with cargoes coming out one after the other for early second decade dates.  Again as it has been the previous month much of the demand was driven by cargoes discharging in Brazil and Argentina.  Unfortunately for owners, a glut of tonnage kept rates at bay for most of the week with a slight jump for a day before coming back to earth.  The USG/UKC trade remained steady throughout the week and closed at 38,000 x WS 112.5 the same rate it open at.  The largest gains were seen on the USG/ECSA route as rates firmed 20 WS point by Wednesday to 38,000 x WS 190 before ultimately coming off to WS 180.  Heading into next week tonnage still remains available for early second decade and will keep rates stable even with an expected early rush on Monday.

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The Perfect Storm

June 7, 2017

Suezmax freight rates out of West Africa have come under recent pressure, plagued by poor fundamentals on both the demand and supply sides of the equation in what can be described as “the perfect storm.”  Despite reports of higher crude output in Nigeria and the recent lifting of force majeure on the Forcados crude stream, we have observed just five vessels reported fixed or on subjects by mid-week, representing softer tanker demand.  From a vessel supply perspective, the tonnage list in West Africa remains long, compounded by a weaker Arabian Gulf market sending ballasters into the region.  

With the tonnage to cargo ratio working in the charterers favor, the voyages across the Atlantic to the US East Coast were quoted at WS 62.5 today, while trips to the United Kingdom were pegged around WS 67.5.  Both trades fell about 15 WS points or about 19% from Fridays close; however, we expect the decline to decelerate and freight rates to trade at or slightly below current levels for the remainder of the week.  Beyond this period, we project Suezmax rates in West Africa to find some support from steady Nigerian oil output as well as increased crude demand from refiners in both Northern Europe and the US Atlantic Coast. 

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Shuttle Tanker Snapshot

May 25, 2017

A shuttle tanker is a vessel specifically designed to transport oil from offshore oil fields or large oil tankers to onshore refineries.  While this is typically the function of a pipeline, a shuttle tanker may be preferred due to their flexibility to transport oil to any destination, easy maintenance and ability to safely operate in harsh climates and deep water regions.  Shuttle tankers are equipped with computerized technology, known as “dynamic positioning,” which help to keep the vessel on position at all times. They also offer additional benefits that pipelines cannot, including the ability to segregate oil, while pipelines usually blend crude from various oil fields.

These types of vessels were most commonly utilized in the North Sea initially; however, due to an increase in oceanic oil exploration and the vessels’ popularity, they are now deployed in many regions across the globe. Activity off the East Coast of South America has now surpassed activity in the North Sea, as calls are frequently made to 19 FPSO/FSOs owned by Petrobras in the area.

There are currently 90 shuttle tankers (including small MR-sized tankers) in the global fleet, with an average age of 10 years old.  Teekay is the world’s largest owner of shuttle tankers, accounting for 31% of the total fleet, followed by Knutsen with 23 shuttle tankers.  The shuttle tanker fleet is anticipated to expand by five vessels from 2017-2018. 

For a more detailed view of shuttle tanker fleet, download McQuilling Services' 2017 Shuttle Tanker Snapshot

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Intertanko Annual Tanker Event 2017

May 22, 2017

On Thursday, May 25, McQuilling Services' Senior Shipping and Finance Advisor, Stefanos Kazantzis, will participate in the "Role of the Broker" Panel Discussion at Intertanko's Annual Tanker Event 2017.  The panel discussion will commence at 1400 hours in the Grande Ballroom at the Houstonian Hotel and will aim to cover the following topics:

  • Brokers - forecasters or fixers?
  • Is the role of the broker evolving in step with the changing face of the chartering and S&P sector and the changing roles of the individual players?
  • Impact of technology on the interaction between industry participants
  • Broker projects desks add strategic evaluation of S&P projects to broking services, with increased involvement and responsibility, advising on financing, employment options and optimimizing project returns.  How are broking houses handling this?

For more information about this event, please visit the Intertanko website

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